04/02/2014 06:03 pm ET Updated Dec 06, 2017

So Much for the Great GM Bailout

Osama Bin Laden is dead, and General Motors is alive.

That was Vice President Joe Biden's go-to applause line throughout the 2012 campaign. The slogan encapsulated President Barack Obama's greatest foreign policy success -- approving the raid that killed the terrorist mastermind -- and what was perceived as his greatest domestic achievement -- rescuing GM from bankruptcy and saving a huge number of jobs.

joe biden campaign

But what kind of company did the government save? One that waited a decade to recall millions of cars with a lethal defect that would shut down engines without warning. One that chose not to replace the defective part, an ignition switch, when it was first detected. It would have cost less than $1 a car to do so.

GM had a "culture of cover up," said Sen. Claire McCaskill, a Missouri Democrat, on Wednesday at a congressional hearing featuring embattled GM CEO Mary Barra.

McCaskill, a former prosecutor, said an engineer for the company had "repeatedly lied" when he didn't admit in a deposition that he had changed the faulty ignition switch, but not the part number -- a move suggesting the company was trying to cover up its previous failure to fix the bad part.

GM's behavior "goes beyond unacceptable," Sen. Kelly Ayotte (R-N.H.) said on Wednesday. "I believe this is criminal," she said.

The automaker, of course, isn't the only big company facing criticism for its actions before or after a government bailout. JPMorgan Chase, Bank of America and Wells Fargo have been accused in multiple federal lawsuits of lying about mortgage investments they knew were lousy in order to boost profits. Foreclosure abuses associated with the mortgage servicing arms of these companies have led to tens of billions of dollars of legal settlements.

GM was perceived as different because its failures as a car company were generally attributed to bad management, and its mistakes are not blamed for triggering a near-financial apocalypse. (There is one hole in this narrative: GM formerly owned a giant lending arm, GMAC, which was later rolled into Ally Financial, one of the five banks that signed a $25 billion mortgage settlement with the states in 2012).

Inasmuch as it existed, GM's reputation as the "good" bailed out company is now permanently undone. The company faces an investigation by federal prosecutors, Congress and the National Highway Traffic Safety Administration, as well as a barrage of class-action lawsuits and individual suits brought by people associated with crashes pegged to cars involved in the recalls.

At Tuesday's congressional hearing, before House lawmakers, Barra tried to distance the current iteration of the auto giant from its past mistakes. "In the past we had more of a cost culture, and now we have a customer culture that focuses on safety and quality," she said.

In Barra's second day of testimony on Wednesday, it was clear that lawmakers weren't satisfied. Senators from both parties blasted GM in unusually harsh language for its failure to correct the deadly flaw, and for refusing to move faster to a recall.

"I really hate to say this, but if this is the new GM leadership, I'm disappointed," said Sen. Barbara Boxer, a California Democrat. "The culture you are representing here today is the culture of the status quo."

After years of having their complaints ignored or denied, the families of people killed in accidents linked to the recalled vehicles are not in a forgiving mood, either.

The mother of a woman who died in a 2009 crash involving a GM vehicle now under a recall described a recent meeting with GM executives as "a waste of my time" in an interview on the Today Show.

GM has settled a few cases involving faulty ignition switches. Other litigation is complicated by the company's bankruptcy, which will make it much harder for accident victims and families to win lawsuits.

The car company was split in two as part of 2009 bankruptcy proceedings. The "old" GM took on the garbage nobody wanted: Closed assembly plants and responsibility for legal claims from accidents that happened before the bankruptcy filing. The "new" GM, the current version of the company, got office buildings and operating plants, as well as legal immunity from prior accident claims.

Lawyers are gearing up to test this immunity. The New York Times has reported that lawyers for accident victims plan to claim that because the new company is essentially the same as the old -- same executives, same equipment, same cars -- GM is in fact liable and the bankruptcy agreement should be thrown out. This seems a long shot.

Instead, pre-2009 victims will likely have a chance to share a compensation fund the company may establish. Though no formal plans have been announced, GM has hired Kenneth Feinberg, the arbiter of the 9/11 victims' compensation fund, to advise the company on how to handle claims by those injured or killed as a result of cars involved in the recall.

However it shakes out, GM will likely spend billions to resolve the mess it created.

The cost of making that ignition switch fix when the problem first cropped up? About $400,000 for tooling, and 90 cents per car.